Fee Lawsuit Rumor Debunked

There’s a rumor circulating in Eugene that suggests the city could be vulnerable to city-services-fee-based litigation like the city of Des Moines, Iowa, which has been fighting lawsuits since 2004. Due to differences in the type of fee, state laws and locally based federal agencies, experts indicate that type of lawsuit wouldn’t be successful in Eugene.

Des Moines’ franchise fee was a charge on utilities that the Des Moines City Council raised from a longstanding 1 percent to 5 percent, which is too high under Iowa law. Oregon law allows cities to charge utilities up to 7 percent in franchise fees for the use of the public right of way, but EWEB pays the city about $12 million a year in taxes instead of using the franchise fee mechanism, according to EWEB spokesman Joe Harwood.

That Des Moines franchise fee is different from Eugene’s proposed city service fee, which would charge each residence a flat fee up to $10 per month, up to $30 for businesses. The Citizens’ Utility Board’s Bob Jenks says franchise fees are common in Oregon, though he hasn’t heard of too many flat, non-usage-related per-person or per-household fees that are collected by a utility.

The federal government sued the city of Des Moines in April because it has allegedly been collecting a city tax on federal agencies, which violates a provision in the Constitution. Opponents of Eugene’s proposed fee say that it’s a tax, not a fee.

The Oregon Department of Revenue’s Derek Gasparini isn’t familiar with Eugene’s proposed fee specifically, but he says, “In loose terms, a fee is usually a fee for a service provided, and it’s a direct service fee — you’re paying for what you get,” while taxes are more widely collected for the greater public good.

Whether the proposed fee would be a true fee or a tax might not matter in terms of taxing federal agencies in Eugene, though. “The only federal agencies that we deal with right now would be the GSA, and that’s for the federal courthouse,” Harwood says, and it would be pretty easy to exempt a single agency from a fee.